Gov’t Wants Pause To Ukraine Money Laundering Suit

By Elliot Weld       

Law360 (May 19, 2023, 2:58 PM EDT) — The federal government asked a Florida federal court to stay a civil case alleging that two Ukrainian oligarchs used properties in the state to launder funds from a criminal scheme while it completes a parallel criminal investigation.

Government attorneys said in a motion Thursday that the suit is one of four civil actions related to the scheme, the other three of which have been stayed since May 2021. A different judge previously denied a motion to stay this case alone without explanation, the government said.

“Yet, as claimants’ first motion to dismiss highlighted, it is necessary to stay this action along with the others in order to avoid adverse effects on the ongoing criminal investigation,” the motion said.

The four cases are related to the same alleged criminal scheme by Ukrainian oligarchs Ihor Kolomoisky and Gennadiy Boholiubov to use proceeds they stole from former Ukrainian lender PrivatBank to buy property in the U.S. The cases seek forfeiture of property obtained with those proceeds, according to the motion. The present case seeks forfeiture of the former CompuCom office park in Dallas, another seeks an office building in Cleveland and another seeks a promissory note issued in connection with a loan used to finance the sale of Stemmons Towers in Dallas. The final case is seeking proceeds from the sale of PNC Plaza in Louisville, Kentucky.

The government alleges that Kolomoisky and Boholiubov stole more than $5 billion from PrivatBank by using their control of the bank to obtain fraudulent loans on behalf of companies they controlled. The fraudulent proceeds were then laundered through accounts in PrivatBank’s Cyprus branch before eventually being disguised in U.S. property and businesses, the government said.

The government said further action in this case would adversely affect the criminal investigation and that it would be “incredibly inefficient, and a waste of the court’s and parties’ resources, to proceed in this action alone.”

The motion cites law under 18 U.S.C. Section 981(g)(1) that the government said mandates a court to stay a forfeiture action when it can demonstrate that continuing the case will adversely affect a criminal investigation.

The forfeiture cases and criminal investigation have been demonstrated to be related, the government said. Attorneys for Mordechai Korf and Uriel Laber, two associates of the oligarchs who assisted in the stateside portion of the alleged scheme and are named as claimants in the suit, said during a previous hearing that they “have no quarrel with there being a related criminal investigation,” according to the motion.

The government said its concerns about allowing the forfeiture case to continue were “not theoretical.” The claimants’ first motion to dismiss the case raised “numerous fact-based arguments” that required the government to respond, but government attorneys were constrained in what they could include because of the ongoing criminal investigation, the motion said.

“Further proceedings would expose the identities of witnesses who have provided information in the criminal investigation,” the government said. “If that occurs, the confidential witnesses may cease providing information, and, to the extent they are not reachable through process in the United States, may make themselves unavailable for future testimony. Potential sources of information would likely be deterred from coming forward.”

A representative for the government did not immediately respond to requests for comment Friday, nor did counsel for the claimants.

The government is represented by Mary K. Butler, Michael C. Olmsted, Peter Steciuk and Shai Bronshtein of the U.S. Department of Justice.

Mordechai Korf and Uriel Laber are represented by Howard Milton Srebnick and Zaharah R. Markoe of Black Srebnick PA, Robert Tully Dunlap and Colleen Lynn Smeryage and Devin Freedman of Freedman Normand Friedland LLP.

Uriel Laber is additionally represented by Scott Alan Srebnick.

The case is USA v. Real Property Located at 7505 and 7171 Forest Lane Dallas, Texas 75230, case number 1:20-cv-23278 in the U.S. District Court for the Southern District of Florida.

–Editing by Stephen Berg.